Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): No positions are currently justified from the risk/reward point of view.

The stock market sold off on Friday despite mildly bullish sentiment before the open. Will Russia-Ukraine tensions drive the market further down?

The S&P 500 index lost 1.90% on Friday, Feb. 11 after going 1.8% down on Thursday, as investors reacted to the Thursday’s inflation release and some further Russia-Ukraine crisis news. Investors fear that the rising inflation will lead to a faster tightening by the Fed. On Wednesday the index reached a local high of 4,590 and on Friday it traded as low as 4,401.4. This morning the market will likely open 0.2% lower following a relatively deep overnight sell-off of the global stock markets. We may see more short-term volatility. The market will be waiting for tomorrow’s Producer Price Index release.

The nearest important resistance level is now at 4,475-4,500, marked by the recent consolidation. The resistance level is also at around 4,550. On the other hand, the support level is at 4,350-4,400, among others. The S&P 500 index retraced most of its breakout above the late January consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Trades Along the 4,400 Level

Let’s take a look at the hourly chart of the S&P 500 futures contract. It reversed its short-term uptrend last week, and this morning it traded as low as 4,360. It still looks like a correction, and there have been no confirmed short-term positive signals so far.

In our opinion, no positions are currently justified from the risk/reward point of view. We are waiting for a potential speculative long position entry, but at lower levels or after a consolidation. (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index will likely open 0.2% lower this morning, but the sentiment much improved following an overnight sell-off. We may see more volatility because of an uncertainty concerning Russia-Ukraine tensions and inflationary data releases.

Here’s the breakdown:

• The S&P 500 index retraced most of its recent advances, as it fell to the 4,400 level on Friday. The market bounced from the resistance levels and it may get closer to the late January consolidation.
• In our opinion, no positions are currently justified from the risk/reward point of view.

As always, we’ll keep you, our subscribers, well-informed.

Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): No positions are currently justified from the risk/reward point of view.

Thank you.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care